Question

As the world’s biggest maker of mobile phones, Nokia, the Finnish company, is a “powerhouse in Europe, Asia, and Latin America, with market shares regularly topping 30 percent”. However, in the United States, Nokia phones have lost popularity over the last few years. In March 2002, Nokia led the American market with 35 percent market share. By June of 2009, its share was only 7 percent. What happened and more importantly, what is Nokia doing about it?

As mobile phone usage skyrocketed, Nokia was the most popular choice. It was the “cool” phone—the one that everyone, from business executive to high school student to stay-at-home-mom wanted. In 2005, Nokia had just launched the N series, an innovative new line with a Web browser, video, music, and pictures in a single phone. That device moved Nokia a generation ahead in the race to build the first real smart phone. The “forecast for Nokia was as sunny and clear as an endless Finnish summer day.” Then came Apple and its iPhone with its clever touch screen and sophisticated software and services. With rave reviews and a reputation for being cool, customers flocked to buy one. However, Nokia executives dismissed the iPhone, saying they were “unimpressed by its engineering.”

Now, three years after Apple introduced the iPhone in 2007, Nokia still has no alternative. It did not anticipate changes in American consumer tastes, like flip phones or touch screens. Another major strategic blunder 246 PART THREE | PLANNING was that its models were based on a European communications standard called GSM when roughly half the United States market used the CDMA (code division multiple access) format. One former Nokia executive said, “Nokia, at the height of its success, decided not to adapt its phones for the U.S. market. That was a mistake and they’re still trying to recover from this.” An executive at a North American network operator said, “The attitude at Nokia was basically: Here is a phone. Do you want it? Nokia wouldn’t play by the rules here, and they have paid a price.” That arrogant attitude and the global economic slowdown have continued to hurt the company’s sales and earnings.

Meanwhile, Nokia set up liaison offices in Atlanta, Dallas, Seattle, and Parsippany, New Jersey, cities where the top American operators have big business units. And it has recently revamped its U.S. operations to collaborate more closely with those major operators. For example, AT&T has begun billing its customers who use Nokia services, keeping those customers from receiving a second bill from Nokia. Best Buy began carrying a Nokia netbook, which is a model for its new collaborative strategy. Nokia also forged a deal with Qualcomm, the largest maker of mobile phone chips for CDMA devices in the United States. It also struck a deal with Microsoft to design Windows Office Mobile software applications for phones that use Nokia’s Symbian operating system. Despite these efforts, however, some industry executives remain unimpressed. One analyst said, “They claim they get it and understand the U.S. market. But the execution still is not there.” Mark Louison, president of Nokia’s North American unit, who has a seat on Nokia’s global management board, said, “In the past, we had a one-size-fits-all mentality that worked well on a global basis but did not help us in this market. That has changed now.” The company recognized that its former strategy had not worked in North America and began trying to lay the groundwork for long-term success. Louison says, “Everything you see us doing is to build the broad set of capabilities to take us broader and deeper into the U.S. market.”

1. Where on the BCG Matrix would you place iPhone and Nokia brands? Where would you place any newly developed products of Iphone on BCG Matrix? Explain. (15)

2. What type of control—feedforward, concurrent, or feedback—do you think would be most important in this situation? Explain your choice (10)

3. What immediate corrective action have been used in this situation? How about basic corrective action? (10)

4. What strategies is Nokia using to revitalize its North American business? (10)

Answer 1

1. Nokia's N series was a cash cow initially but the firm did not invest the proceeds in any star products, allowing Apple to launch a star product in the vacuum, the iPhone which became a huge cash generator. Nokia is now a Dog on the BCG matrix as it holds a low market share and continues to lose ground to its competitors. Nokia is attempting to move into the Star quadrant by forming alliances and investing in innovation and solutions that their customer market wants.

Apple is therefore a Star on the BCG matrix as it is able to maintain a high market share and growth. The iPhone soon became a Cash cow, however Apple continued to improve upon its products releasing more Star products to ensure a continuous supply of innovative products. New iPhone products will be part of the Cash cow quadrant unless they are drastically different from earlier products and show higher growth and market share.

2. Concurrent control would be most effective for Nokia to be able to gain back some market share. The company has taken new steps for its new strategy to gain back market share, however they still seem to be lagging behind in meeting customer requirements. An effective control therefore would be to ensure that customer feedback is collected and incorporated back into product design and launch throughout the process so that current trends and latest information is adopted at the earliest to create a Star product that can propel them into a higher level of success. The company so far has not taken market and customer feedback into account in managing its cash cow products, resulting in a decline. Listening to changing needs e.g. CDMA vs GSM, flip phones, touch screen popularity etc. can help the firm assimilate new features that can help them offer more competent rivalry in the market. The

3. Since the damage is done as seen by the current low market share, Nokia should use feedforward controls to identify where their operations and strategies differ from their successful rivals and to try and adopt some of those processes into their own future operations. Nokia has formed some new deals with supplementary and complementary services and products, however Star products need new innovations to be included for products to really capture consumer interest. To get ahead of the curve Nokia must research and identify unusual and creative solutions that will delight a customer. This can be in the way of customisations for the north american market, improvement of services, multi-range products (not one size fits all) that will appeal to a growing individualistic customer market.

4. Nokia has opened a lot more branches to ensure their operations continue in key regional areas so that growth can be targeted differently in different regions. It has also increased its collaborative activities, forming alliances with - service providers such as AT&T for better customer service,

- software/chip makers to create products more suited to customer needs

The firm seems to be making efforts to incorporate market feedback into future products to compete more effectively with current rivals.